This is the accessible text file for GAO report number GAO-13-272
entitled 'Indian Health Service: Capping Payment Rates for Nonhospital
Services Could Save Millions of Dollars for Contract Health Services'
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United States Government Accountability Office:
GAO:
Report to Congressional Addressees:
April 2013:
Indian Health Service:
Capping Payment Rates for Nonhospital Services Could Save Millions of
Dollars for Contract Health Services:
GAO-13-272:
GAO Highlights:
Highlights of GAO-13-272, a report to congressional addressees.
Why GAO Did This Study:
IHS provides health care to American Indians and Alaska Natives. When
care at an IHS-funded facility is unavailable, IHS’s CHS program pays
for care from external providers. Hospitals are required to accept
Medicare rates from federal and tribal CHS programs, while physicians
and other nonhospital providers are paid at either billed charges or
negotiated, reduced rates. The Patient Protection and Affordable Care
Act requires GAO to compare CHS program payment rates with those of
other public and private payers. GAO examined (1) how payments to
physicians by IHS’s federal CHS programs compare with what Medicare
and private health insurers would have paid for the same services, (2)
physicians’ perspectives about how a cap on payment rates could affect
them, (3) hospitals’ perspectives about how the MLR requirement
affected them, and (4) IHS and tribal officials’ perspectives about
the MLR requirement and a potential cap on nonhospital services. GAO
compared 2010 physician claims data for federal CHS programs with the
Medicare Physician Fee Schedule and claims from private insurers. GAO
also spoke to a nongeneralizable sample of 10 physicians and 9
hospitals that interacted frequently with IHS and spoke to IHS and
tribal officials where these providers practiced.
What GAO Found:
The Indian Health Service’s (IHS) federal contract health services
(CHS) programs primarily paid physicians at their billed charges,
which were significantly higher than what Medicare and private
insurers would have paid for the same services. IHS’s policy states
that federal CHS programs should purchase services from contracted
providers at negotiated, reduced rates. However, of the almost $63
million that the federal CHS programs paid for physician services
provided in 2010, they paid about $51 million (81 percent) to
physicians at billed charges and about $12 million (19 percent) to
physicians at negotiated, reduced rates. Payments for other types of
nonhospital services followed similar trends, with about $40 million
out of $52 million (77 percent) paid at billed charges. GAO estimated
that IHS’s federal CHS programs paid two times as much as what
Medicare would have paid and about one and a quarter times as much as
what private insurers would have paid for the same physician services
provided in 2010. If federal CHS programs had paid Medicare rates for
these services, they could have used an estimated $32 million in
savings to pay for many of the services that IHS is unable to fund
each year. Savings for the overall CHS program may be even higher, as
this analysis does not include other types of nonhospital services or
the CHS program funding that goes to tribal CHS programs, which the
Department of Health and Human Services’ (HHS) Office of Inspector
General found also paid for nonhospital care above Medicare rates.
Although the 10 physicians GAO interviewed were among those most
frequently paid by federal CHS programs, 8 said their CHS program
payments constituted 10 percent or less of their total payments. Some
physicians identified ways that capping CHS program payments for
nonhospital services, including physician services, at Medicare rates
could benefit the CHS program and physician practices. However, other
physicians were concerned that reducing payment rates to Medicare
levels could negatively affect their practices.
Seven of nine hospitals GAO interviewed said the Medicare-like rates
(MLR) required by statute had little negative effect, generally
because they already had contracts with the CHS program to be paid
Medicare rates. While two hospitals previously paid by the CHS program
at or near billed charges said they were financially affected by the
MLR requirement, both said it had not affected their delivery of care
to CHS program patients.
IHS and tribal officials GAO interviewed said the MLR requirement for
hospital services generated savings that allowed CHS programs to
expand access to health care. They said that a cap on nonhospital
service payments, including physician services, could have benefits
and challenges. Most IHS officials indicated that it was unlikely they
could negotiate many more contracts. Some tribal officials said that
some physicians might think Medicare rates were too low and decide to
no longer accept tribal patients, although they agreed that a cap at
these rates could save money. IHS officials noted, however, that they
would not be able to implement a cap for nonhospital services,
including physician services, unless the agency received explicit
statutory authority to do so.
HHS stated in its comments that it concurred with GAO’s conclusions
and recommendation and added that imposing a cap at Medicare rates
would allow IHS to fund additional services.
What GAO Recommends:
Congress should consider capping CHS program payments for nonhospital
services, including physician services, at rates comparable to other
federal programs. Should Congress cap payments, we recommend HHS
direct IHS to monitor access to care.
View [hyperlink, http://www.gao.gov/products/GAO-13-272]. For more
information, contact Kathleen M. King at (202) 512-7114 or
kingk@gao.gov.
[End of section]
Contents:
Letter:
Background:
IHS's Federal CHS Program Primarily Paid Physicians at Their Billed
Charges, Which Were Significantly Higher than What Medicare and
Private Insurers Would Have Paid:
Most Physicians We Interviewed Said CHS Program Payments Were a Small
Part of Their Total Payments and Cited Both Advantages and Concerns
about Capping Payments at Medicare Rates:
Most Hospitals We Interviewed Indicated Little Negative Effect from
the Current MLR Requirement, as They Already Had CHS Program Contracts
to Be Paid at Medicare Rates:
IHS and Tribal Officials Said the MLR Requirement Allowed Them to
Expand Access and Said That a Similar Cap for Nonhospital Services
Could Have Similar Benefits:
Conclusions:
Matter for Congressional Consideration:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Comments from the Department of Health and Human Services:
Appendix II: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Savings for IHS's Federal CHS Programs Due to Physician
Contracts for Services Provided in 2010, by Area Office:
Figures:
Figure 1: Counties Designated as CHS Delivery Areas (CHSDA) in the 12
IHS Areas:
Figure 2: Overview of IHS's Process for Determining CHS Program
Payments:
Figure 3: Total Payments by IHS's Federal CHS Programs for Services
Provided in 2010:
Figure 4: Total Payments Made by IHS's Federal CHS Programs to
Contracted and Noncontracted Physicians and All Other Nonhospital
Providers for Services Provided in 2010:
Figure 5: Contracted and Noncontracted Physicians Paid by IHS's
Federal CHS Programs for Services Provided in 2010, by Area Office:
Figure 6: Comparison of Payments from IHS's Federal CHS Programs with
Medicare Rates for Physician Services Provided in 2010:
Figure 7: Comparison of Payments from IHS's Federal CHS Programs with
Private Insurance Rates for Physician Services Provided in 2010:
Abbreviations:
BCBSNM: BlueCross BlueShield of New Mexico:
CAH: critical access hospital:
CHEF: Catastrophic Health Emergency Fund:
CHS: contract health services:
CHSDA: CHS Delivery Area:
CMS: Centers for Medicare & Medicaid Services:
DOD: Department of Defense:
EMTALA: Emergency Medical Treatment and Active Labor Act:
HHS: Department of Health and Human Services:
IHS: Indian Health Service:
MedPAC: Medicare Payment Advisory Commission:
MLR: Medicare-like rates:
OIG: Office of Inspector General:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 11, 2013:
Congressional Addressees:
The Indian Health Service (IHS), an agency within the Department of
Health and Human Services (HHS), is charged with providing health care
services to the approximately 2.1 million American Indians and Alaska
Natives who are members or descendants of federally recognized tribes.
[Footnote 1] These services are provided through direct care at
federally or tribally operated facilities--such as hospitals and
health centers. When services are unavailable at these facilities, the
facilities may use IHS contract health services (CHS) program funds to
pay for patients to obtain services from external providers, including
hospitals and office-based physicians. The CHS program at each
individual facility may be federally or tribally operated and is
responsible for managing program funds. However, our prior work has
found that available CHS program funds have not been sufficient to
ensure access to care for American Indians and Alaska Natives.
[Footnote 2] In 2005, we reported that the CHS program was not able to
pay for all eligible services, and that these gaps sometimes resulted
in diagnosis and treatment delays that could exacerbate the severity
of a patient's condition and thus the need for more intensive
treatment.[Footnote 3] Since then, funding for the CHS program has
increased from $498 million in fiscal year 2005 to almost $845 million
in fiscal year 2012. However, we recently reported that the CHS
programs at federal and tribal facilities continue to be unable to pay
for all eligible services.[Footnote 4]
This inability to pay for all eligible care underscores the need for
the agency to maximize its use of resources, and thus attention has
been paid to the rates the CHS program pays external providers.
Providers set billed charges--the amounts they bill before any
negotiated rates are applied--but the payments they receive vary by
payer. Historically, the CHS program paid providers for services at
either their billed charges or at lower rates negotiated with the
providers. In comparison, Medicare and private insurance are two of
the largest sources of revenue for many providers.[Footnote 5]
Medicare pays providers according to a formula that includes several
factors, such as geographic location, and private insurers typically
have contractual arrangements with providers under which they
negotiate lower payment rates for services on behalf of their members
or beneficiaries. In 1986, IHS issued a policy stating that it should
not contract to pay more for services than other federal programs and
that it would contract to purchase services only with providers that
agreed to accept negotiated rates no higher than those paid by
Medicare,[Footnote 6] which covered almost 49 million people in 2011.
The policy also stated that it should only use noncontracted providers
in certain situations. However, in 1999, HHS's Office of Inspector
General (OIG) reported that the CHS program continued to pay most
providers at rates that were higher than those paid by Medicare.
[Footnote 7] It also reported that, because of the nature of care
provided (often specialty or emergency services), IHS was not always
able to consider costs when purchasing services from providers and
that, because of the voluntary nature of the policy, many providers
did not respond to IHS's requests to negotiate reduced rates.
In 2003, the Congress established a payment rate cap on CHS program
payments for hospital services so the program could use the resulting
savings to expand patient access to care. Specifically, the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 required
that Medicare-participating hospitals accept patients of both
federally and tribally operated CHS programs and accept payment at no
more than Medicare rates--referred to as Medicare-like rates (MLR)--
for services provided.[Footnote 8] IHS implemented this MLR
requirement in July 2007. This requirement did not apply to physician
services, including those provided in hospitals, or to services by
providers at other nonhospital service locations.[Footnote 9] For care
in these other settings, physicians and other nonhospital providers
would continue to be paid at either their billed charges or at
negotiated rates below their billed charges.
In a September 2009 follow-up report, the OIG found that about 71
percent of payments for nonhospital claims were paid at rates higher
than the Medicare rates.[Footnote 10] It also reported that both
federal and tribal CHS programs faced challenges trying to negotiate
lower rates with providers, especially in rural areas with few
providers. On the basis of these results, the OIG recommended that IHS
seek legislative authority to cap CHS program payments for nonhospital
providers. In a September 2009 study, IHS estimated that from fiscal
years 2006 through 2008, federal CHS programs paid a total of about
$195 million to nonhospital providers, which was about $85 million
more than if these services had been paid at the Medicare rates. As of
January 2013, IHS had not addressed the OIG's recommendation to seek
legislative authority to cap CHS program payments to nonhospital
providers.
The Patient Protection and Affordable Care Act requires GAO to study
the amounts paid for health care furnished by providers under the CHS
program, including a comparison with the rates paid by other public
and private payers.[Footnote 11] To respond to this mandate, this
report examines (1) how payments to physicians by IHS's federal CHS
programs compare with what Medicare and private health insurers would
have paid for the same services, (2) physicians' perspectives about
how a federally required cap on payment rates could affect them, (3)
hospitals' perspectives about how the MLR requirement has affected
them, and (4) IHS and tribal perspectives about the effect of the MLR
requirement on hospitals and the potential effect of a MLR requirement
on nonhospital services.
To examine how payments to physicians by IHS's federal CHS programs
compare with what Medicare and private health insurers would have paid
for the same services, we obtained paid federal CHS program claims
from IHS for health care services provided in calendar year 2010, the
most recent year for which the most complete data were available.
These claims data did not include claims paid by tribal CHS programs.
[Footnote 12] We examined payments for physician and other nonhospital
services, which were not subject to the MLR requirement. We excluded
services for which the patient had another form of insurance, because
the CHS program is generally a payer of last resort and the federal
CHS programs' payments would have reflected only the remaining
balances after payments from the primary payers. There were 372,840
nonhospital services where federal CHS programs were the primary
payer; payments for these services constituted about 44 percent of
total payments for all services provided by federal CHS programs in
2010. From this group of nonhospital services, we isolated physician
services. Specifically, we excluded nonhospital services that were not
covered by the 2010 Medicare Physician Fee Schedule.[Footnote 13] We
also excluded services provided by anesthesiologists because the
information collected by IHS about these services did not contain all
of the information necessary to determine comparable Medicare rates.
There were 246,273 remaining physician services where federal CHS
programs were the primary payer, constituting about 24 percent of
total payments for all services provided by federal CHS programs in
2010.[Footnote 14] For each physician service, we compared the CHS
program payment amount to the corresponding rate on the 2010 Medicare
Physician Fee Schedule. When determining the Medicare rates, we priced
the services as they were identified in the CHS program claims and we
did not independently verify the accuracy or completeness of the CHS
program claim information.[Footnote 15] As Medicare does, we adjusted
the payment rate for a given service according to the physician's
geographic location and the service setting, such as whether the
service was provided in a hospital or a physician's office.[Footnote
16] We also compared the CHS program payments for physician services
with those of private insurers. To estimate the rates that private
insurers paid, we obtained the Truven Health Analytics MarketScan®
Commercial Claims and Encounters Database, which contains claims paid
by 100 insurers and includes enrollees located in 50 states in 2010.
To account for any variation in payments due to geographic location,
we compared only those physician services from the federal CHS program
claims data that were provided in the same county as those in the
private insurance claims data. Of the 246,273 total physician services
in the federal CHS program claims data, we identified 231,099 (about
94 percent) services that were paid for by private insurers in the
same counties. For each county, we calculated an average rate paid by
private insurers for a service and compared that average rate with the
federal CHS programs' payment for that service. We priced the services
as they were identified in the CHS program and private insurer claims
and we did not independently verify the accuracy or completeness of
either payer's claim information. We assessed the reliability of IHS's
federal CHS program claims data, the Medicare Physician Fee Schedule
data, and the Truven Health Analytics MarketScan® Commercial Claims
and Encounters Database by reviewing documentation and discussing the
database with knowledgeable officials. We also performed data
reliability checks, such as examining the data for missing values and
obvious errors, to test the internal consistency and reliability of
the data. After taking these steps, we determined the data were
sufficiently reliable for our purposes.
To examine physicians' perspectives about how a federally required cap
on payment rates could affect them, we interviewed a sample of 10
physicians paid by federal CHS programs for services provided in
2010.[Footnote 17] To identify physicians located on or near
reservations, we limited our selection to those physicians located in
counties designated by IHS as CHS Delivery Areas (CHSDA).[Footnote 18]
Of these, to ensure that our sample was geographically diverse and
contained physicians who interacted frequently with federal CHS
programs, we divided the physicians into groups according to their
urban or rural location[Footnote 19] and identified the top 25 percent
of physicians according to their volume of paid CHS program services
provided in 2010. This gave us a list of 101 rural physicians and a
list of 757 urban physicians who interacted the most frequently with
federal CHS programs. From each list, we selected 4 rural physicians
and 6 urban physicians, 2 of whom we selected from among the top 5
percent of each list on the basis of their claims volume.[Footnote 20]
The physicians we interviewed represented a range of specialties,
including radiology, cardiology, ophthalmology, surgery, and primary
care. Of the 10 physicians we selected, 5 worked in group practices, 3
in solo practices, 1 was a rural health clinic, and 1 was a billing-
services company that provided those services to the selected
physician and more than 60 other clients. Given the small number of
physicians in our sample and our process for selecting them, the
results from these interviews are not generalizable to all physicians
interacting with the CHS program. We asked physicians a standard set
of open-ended questions and did not independently validate their
reported experiences.[Footnote 21]
To examine hospitals' perspectives about how the MLR requirement has
affected them, we interviewed officials from a sample of 10 hospitals
that were paid by federal CHS programs for services provided in 2010.
As with our selection of physicians, we limited our selection to those
hospitals located in CHSDAs and divided the hospitals into groups
according to their urban or rural location.[Footnote 22] Then, we
identified the top 25 percent of hospitals according to their volume
of paid CHS program services provided in 2010. This gave us a list of
27 rural hospitals and a list of 34 urban hospitals that interacted
the most frequently with federal CHS programs. From each list, we
selected 5 hospitals, 2 of which we selected from among the top 5
percent of each list on the basis of their claims volume. At each
hospital, we interviewed officials identified as knowledgeable about
that hospital's finances and interactions with CHS programs. While we
interviewed 10 hospitals, we reported on the perspectives of 9 because
the officials at 1 hospital had limited experience with CHS programs.
Given the small number of hospitals in our sample and our process for
selecting them, the results from these interviews are not
generalizable to all hospitals interacting with CHS programs. We asked
hospitals a standard set of open-ended questions and did not
independently validate their reported experiences.[Footnote 23]
To examine IHS and tribal perspectives about the effect of the MLR
requirement on hospitals and the potential effect of a MLR requirement
on nonhospital services, we interviewed IHS area office officials to
obtain their perspectives on payment rates, patient access to care,
and rate negotiation efforts. We selected the six area offices--
Aberdeen, Albuquerque, Bemidji, Billings, Navajo, and Oklahoma City--
from which our interviewed hospitals and physicians received payment
for the majority of the services they provided to the federal CHS
programs in 2010.[Footnote 24] These six area offices represented 84
percent of payments by federal CHS programs in 2010. We also
interviewed tribal officials, including representatives of tribal CHS
programs, from several of these areas and the California area, where
all CHS programs are tribally operated. Given the small number of
tribal officials in our sample and our process for selecting them, the
results from these interviews are not generalizable to all tribes
interacting with CHS programs. We asked the tribal and IHS area office
officials a standard set of open-ended questions and did not
independently validate their reported experiences.
We conducted this performance audit from November 2011 to April 2013
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
IHS oversees the CHS program through 12 area offices. The federally
and tribally operated facilities in each of these areas use CHS
program funds to purchase health care services from external
hospitals, physicians, and other providers. Medicare-participating
hospitals are required to accept CHS program patients at rates no
higher than the rates paid by the Centers for Medicare & Medicaid
Services' (CMS) Medicare program, while federal and tribal CHS
programs pay physicians and other nonhospital providers at either
their billed charges or at reduced rates an IHS area office or tribal
CHS program negotiates with them. Other federal health care programs--
administered by the Department of Defense (DOD) and the Department of
Veterans Affairs (VA)--have adopted Medicare rates as the basis for
their standard payment rate for both hospital and nonhospital services.
CHS Program Organization:
IHS manages the CHS program through a decentralized system of 12 area
offices, which oversee individual CHS programs in 35 states where many
American Indian and Alaska Native communities are located. (See figure
1 for a map of the counties IHS designates as CHSDAs. Residence in
these counties is generally a requirement for obtaining contract
health services.) About 46 percent of CHS program funds are
distributed by IHS to federal CHS programs, and the other 54 percent
to tribal CHS programs. Tribal CHS programs must meet the same
statutory and regulatory requirements as federal CHS programs, but
they are not generally subject to the same policies, procedures, and
reporting requirements established for federal CHS programs.[Footnote
25]
Figure 1: Counties Designated as CHS Delivery Areas (CHSDA) in the 12
IHS Areas:
[Refer to PDF for image: illustrated U.S. map]
Counties Designated as CHS Delivery Areas (CHSDA) in IHS Areas:
Aberdeen;
Alaska;
Albuquerque;
Bemidji;
Billings;
California;
Nashville;
Navajo;
Oklahoma City;
Phoenix;
Portland;
Tucson.
Also depicted:
Counties in both California and Phoenix;
Counties in both Phoenix and Tucson;
Counties in both Phoenix and Navajo;
Counties in both Navajo and Albuquerque.
Source: GAO analysis of IHS information.
Notes: While CHSDAs are typically counties, the city of Elton,
Louisiana is also designated as a CHSDA in the Nashville area.
Information is as of January 2013.
[End of figure]
Funds permitting, federal and tribal facilities use CHS program funds
to pay for eligible patients to receive services from external
providers if the services are not available at IHS-funded facilities.
The services purchased include hospital, specialty physician,
outpatient, laboratory, dental, radiology, pharmacy, and
transportation services. Patients must meet certain requirements to
have their services paid for by the CHS program. For example, patients
must be members of federally recognized tribes and live in specific
areas. If these requirements are met, CHS program committees at each
federal or tribal facility evaluate the medical necessity of each
patient case and assign it a priority level.[Footnote 26] Facilities
first pay for the highest priority services. If there are other health
care resources available to the patient, such as Medicare, Medicaid,
or private health insurance, these resources must first be used to pay
for services before the CHS program covers any remaining costs because
the CHS program is generally the payer of last resort.[Footnote 27]
For federal CHS programs, once the service has been approved and the
care provided, providers obtain payment for CHS program services by
sending their claims to IHS's fiscal intermediary, BlueCross
BlueShield of New Mexico (BCBSNM). BCBSNM processes claims for all of
the federal CHS programs. The tribal CHS programs process their own
claims or contract with a fiscal intermediary of their choosing; a
small number of tribal programs contract with BCBSNM.
CHS Program Payment Rates:
The rate that a CHS program pays a provider is determined by several
factors, including whether the provider is a hospital subject to MLR
reimbursement or the provider has negotiated reduced payment rates
with IHS or the tribe. (See figure 2.) CHS program payments for
hospital services--inpatient and outpatient services provided in
Medicare-participating hospitals--are subject to the MLR requirement.
IHS generally calculates the MLR using the same methodology that
Medicare uses to pay its claims, so the amount the CHS program pays
for a service generally equals the amount that Medicare would pay the
hospital for that same service. CHS program payments to providers for
nonhospital services--including services provided by hospital-and
office-based physicians--are not subject to the MLR requirement.
[Footnote 28] Each CHS program pays these providers at their billed
charges unless the IHS area office has negotiated with the provider
for a reduced rate. Each IHS area office can negotiate contracts with
the providers that serve the CHS programs in its geographic area.
Tribally operated facilities are independent and may negotiate their
own contracts with providers. However, IHS officials said that when
they negotiate with providers, they may ask those providers to honor
the negotiated rates when they interact with tribal CHS programs.
Figure 2: Overview of IHS's Process for Determining CHS Program
Payments:
[End of figure: process map]
Is the claim subject to the Medicare-like rate (MLR) requirement?
Yes (Hospital claim):
Has IHS negotiated a contract for a payment rate that is lower than
MLR?
Yes: Pay claim at the rate that is lower than MLR;
No: Pay claim at MLR.
No (Nonhospital claim):
Has IHS negotiated a contract for a payment rate that is lower than
billed charges?
Yes: Pay claim at the negotiated reduced rate;
No: Pay claim at billed charges.
Source: GAO analysis IHS documents.
[End of figure]
In 1986, IHS issued a policy advising area offices to negotiate rates
no higher than Medicare rates.[Footnote 29] In discussing the need for
the policy, IHS noted that paying providers for CHS program services
at billed charges resulted in a depletion of funding that often
required the postponement of needed care for American Indians and
Alaska Natives. The agency also noted that IHS should not pay more
than other federal agencies for the same services. The agency
recommended that area offices identify and prioritize high-volume
providers with whom to negotiate lower rates.[Footnote 30] In
addition, the agency indicated that contracts negotiated with
providers for payments at rates higher than those paid by Medicare,
such as a discount off billed charges or a percentage above Medicare
rates, would be approved by IHS on a case-by-case basis. Further, the
agency stated that CHS programs should only use providers that do not
have a contract with the CHS program in two situations: if a patient
needs emergency care and if the patient's health requires that the
services be rendered by a noncontract provider. However, IHS has since
stated it has not been possible to negotiate contracts with each of
the providers that the CHS program uses because of limitations in area
office contracting staff and some providers not being willing to enter
into a contract.[Footnote 31]
Federal CHS Program Payments for Services Provided in 2010:
For services provided in calendar year 2010, IHS's federal CHS
programs paid $262.8 million to 6,113 providers for services for
66,750 patients. Of these payments, federal CHS programs paid $104.0
million (about 40 percent of total payments) for hospital services
where the CHS program was the primary payer and about $114.7 million
(about 44 percent of total payments) for nonhospital services where
the CHS program was the primary payer.[Footnote 32] Of these payments
for nonhospital services, the federal CHS programs paid $62.5 million
(about 55 percent) for hospital-and office-based physician services.
[Footnote 33] (See figure 3.)
Figure 3: Total Payments by IHS's Federal CHS Programs for Services
Provided in 2010:
[Refer to PDF for image: pie-chart]
IHS’s federal CHS program payments:
Hospital and nonhospital services (CHS program is not the primary
payer: $44.1 million;
Hospital services (CHS program is the primary payer: $104.0 million;
Nonhospital services (CHS program is the primary payer: $114.7 million:
* Physician services: $62.5 million;
* Other nonhospital services: $52.1 million.
Source: GAO analysis of IHS data.
Note: In the figure, the sum of the payments for the "other nonhospital
services" and the "physician services" does not total to $114.7 million
because of rounding.
[End of figure]
Access to Care through Other Federal Programs That Purchase Health
Care at Medicare Rates:
CMS uses Medicare payment methodologies that take many factors, such
as the type and location of service delivery, into account when
calculating hospital and physician payments for a given service.
[Footnote 34] CMS periodically reassesses the specific Medicare
payment rates to adjust for increases in the cost of delivering care.
The Medicare Payment Advisory Commission (MedPAC) has stated that the
goal of Medicare payment policy should be to keep payment rates low
enough to ensure efficient use of taxpayer funds, but high enough to
ensure that patient access to care is not negatively affected by
reduced provider participation.[Footnote 35] Overall, CMS paid $549
billion in 2011 for care provided to Medicare's almost 49 million
beneficiaries.
Other federal health care programs also use these Medicare
methodologies as the basis for the rates they pay providers. For
example, reimbursement rates for civilian providers under TRICARE,
DOD's health care program, are generally limited to Medicare rates.
[Footnote 36] Beginning in fiscal year 1991, in an effort to control
costs, the Congress directed DOD to gradually implement this
methodology by lowering its reimbursement rates to Medicare amounts by
no more than 15 percent each year, and current law requires DOD to use
Medicare payment methodologies to the extent practicable.[Footnote 37]
Prior to this, DOD payment rates were, on average, 50 percent higher
than Medicare rates. In addition, VA has implemented a similar rate
cap to lower costs for services from non-VA providers.[Footnote 38] VA
pays for hospital and physician services at Medicare rates, and
beginning in February 2011, in an effort to help contain costs, the
agency required that Medicare rates be used to pay for other types of
nonhospital services, such as laboratory, home health, and hospice
services.[Footnote 39] VA anticipated that payment at Medicare rates
for these other nonhospital services would save it more than 50
percent relative to its current payments. In issuing the final rule
describing this change,[Footnote 40] the agency indicated that a goal
of the rate cap was to align its payment structure with Medicare,
which VA described as the federal government's standard for purchasing
care from private-sector providers.
We and MedPAC have reported that Medicare beneficiaries have generally
experienced few problems accessing physician services, although access
problems may exist in certain situations.[Footnote 41] For example, in
2009, we reported that the percentage of Medicare beneficiaries who
reported major difficulties accessing specialty care was the same for
those living in urban areas and in rural areas in 2008--2.1 percent.
We also noted that the number of physicians billing Medicare for
services had increased between 2000 and 2007, suggesting that more
physicians were generally willing to accept Medicare patients. Some
studies have found that access-to-care problems may exist for certain
types of Medicare beneficiaries, such as those in fair or poor health,
racial minorities, or those living in the most remote areas.[Footnote
42] However, studies have also suggested that factors other than
payment rates, such as physician capacity to accept patients and
travel time, are important influences on patient access to care.
[Footnote 43] With respect to DOD's TRICARE program, we have reported
that reimbursement rates and provider shortages in some locations have
hindered access to care.[Footnote 44] Additional studies by DOD have
cited reimbursement rates as the primary reason civilian providers may
be unwilling to accept TRICARE beneficiaries as patients.
DOD and VA have each made modifications to their payment methodologies
in an attempt to address concerns about access to care. For example,
both agencies pay higher rates in Alaska because of concerns that
providers would not accept their beneficiaries at Medicare rates. In
contrast to the Medicare rates it pays elsewhere, in Alaska, VA and
DOD pay providers using separate payment methodologies.[Footnote 45]
In prior reviews of DOD's program, we have noted that there is little
evidence these increased payments improved patient access to
care.[Footnote 46] We noted that increased payment rates do little to
address more systemic causes of limited access, such as scarcity of
physicians and patient transportation difficulties.[Footnote 47]
We have also noted that the potential for payment rate changes to
affect patient access to care points to the need to monitor
beneficiary access.[Footnote 48] This type of monitoring is conducted
by some federal agencies paying providers at Medicare rates. For
example, as part of its monitoring, CMS conducts annual surveys of
Medicare beneficiaries to assess their satisfaction with care and
their ability to access health care. Additionally, in fiscal year
2004, in response to concerns about certain TRICARE beneficiaries'
access to care from civilian providers, the Congress directed DOD to
monitor access through a survey of civilian providers.[Footnote 49] As
these concerns continued, DOD was further directed in fiscal year 2008
to conduct annual surveys of both beneficiaries and civilian providers
to determine the adequacy of access to health care and mental health
care providers for certain beneficiaries.[Footnote 50]
IHS's Federal CHS Program Primarily Paid Physicians at Their Billed
Charges, Which Were Significantly Higher than What Medicare and
Private Insurers Would Have Paid:
More than 80 percent of IHS's federal CHS program payments to
physicians for services provided in 2010 were paid to noncontracted
physicians at billed charges, rather than to contracted physicians at
negotiated, reduced rates. IHS's federal CHS program payments to these
physicians were significantly higher than what we estimate Medicare
and private insurers would have paid for these same services.
IHS's Federal CHS Program Paid More than 80 Percent of Total Payments
to Physicians at Billed Charges for Services Provided in 2010:
More than 80 percent of IHS's federal CHS program payments to
physicians for services provided in 2010 were paid to noncontracted
physicians at billed charges, rather than to contracted physicians at
negotiated, reduced rates. With the exception of uninsured patients,
who are expected to pay providers at billed charges, other public and
private payers typically pay providers at lower rates.[Footnote 51]
However, of the $62.5 million that federal CHS programs paid
physicians, they paid about $50.5 million (about 81 percent) to
noncontracted physicians at billed charges and about $12.1 million (19
percent) to contracted physicians at negotiated, reduced rates. IHS's
federal CHS program payments to other types of nonhospital providers
for services provided in 2010 showed similar trends. Specifically, the
federal CHS programs paid $40.3 million out of a total of $52.1
million (77 percent) to other noncontracted nonhospital providers at
billed charges and about $11.8 million (about 23 percent) to other
contracted nonhospital providers at negotiated, reduced rates. (See
figure 4.)
Figure 4: Total Payments Made by IHS's Federal CHS Programs to
Contracted and Noncontracted Physicians and All Other Nonhospital
Providers for Services Provided in 2010:
[Refer to PDF for image: pie-chart]
IHS’s federal CHS program payments:
Physicians: $62.5 million:
* Contracted physicians: $12.1 million;
* Noncontracted physicians: $50.5 million;
All other nonhospital providers: $52.1 million:
* All other contracted nonhospital providers: $11.8 million;
* All other noncontracted nonhospital providers: $40.3 million.
Source: GAO analysis of IHS data.
Note: In the figure, the sum of the payments for contracted and
noncontracted physicians does not total $62.5 million because of
rounding.
[End of figure]
While IHS's policy states that CHS programs should purchase services
from contracted providers in most situations, a significant majority
of physicians paid by federal CHS programs for services provided in
2010 did not have contracts. Specifically, of the 3,531 total
physicians paid by federal CHS programs for services provided in 2010,
3,085 were noncontracted physicians paid at billed charges and 516
were contracted physicians paid at negotiated, reduced rates for at
least some of their services.[Footnote 52] Although IHS's policy also
states that contracting efforts should be focused on high-volume
providers, the majority of these high-volume providers did not have
contracts. For example, on the basis of the number of services
provided, about 78 percent of the top 25 percent of physicians did not
have contracts, nor did about 74 percent of the top 5 percent of
physicians. In addition, an examination of the data by area office
showed that noncontracted physicians constituted the majority of paid
physicians in all IHS areas. Specifically, for each of the 10 IHS
areas with federally operated CHS programs, noncontracted physicians
constituted more than two-thirds of all physicians paid for services
provided in 2010.[Footnote 53] (See figure 5.) For all other
nonhospital providers, the numbers of contracted and noncontracted
providers showed similar trends. Specifically, of the 3,590 other
nonhospital providers paid for services provided in 2010, 3,145 other
nonhospital providers did not have contracts and were paid at billed
charges and 507 other nonhospital providers did have contracts and
were paid at negotiated, reduced rates for at least some of their
services.[Footnote 54]
Figure 5: Contracted and Noncontracted Physicians Paid by IHS's
Federal CHS Programs for Services Provided in 2010, by Area Office:
[Refer to PDF for image: stacked vertical bar graph]
IHS area office[A]: Nashville;
Non-Contracted Physicians: 80;
Contracted Physicians[B]: 27;
Total: 107.
IHS area office[A]: Bemidji;
Non-Contracted Physicians: 119;
Contracted Physicians[B]: 11;
Total: 130.
IHS area office[A]: Tucson;
Non-Contracted Physicians: 121;
Contracted Physicians[B]: 58;
Total: 179.
IHS area office[A]: Portland;
Non-Contracted Physicians: 160;
Contracted Physicians[B]: 18;
Total: 178.
IHS area office[A]: Albuquerque;
Non-Contracted Physicians: 336;
Contracted Physicians[B]: 33;
Total: 369.
IHS area office[A]: Navajo;
Non-Contracted Physicians: 389;
Contracted Physicians[B]: 38;
Total: 427.
IHS area office[A]: Aberdeen;
Non-Contracted Physicians: 453;
Contracted Physicians[B]: 59;
Total: 512.
IHS area office[A]: Billings;
Non-Contracted Physicians: 519;
Contracted Physicians[B]: 86;
Total: 605.
IHS area office[A]: Oklahoma City;
Non-Contracted Physicians: 581;
Contracted Physicians[B]: 206;
Total: 787.
IHS area office[A]: Phoenix;
Non-Contracted Physicians: 779;
Contracted Physicians[B]: 50;
Total: 829.
IHS area office[A]: All Areas;
Non-Contracted Physicians: 3,085;
Contracted Physicians[B]: 516;
Total: 3,601.
Source: GAO analysis of IHS data.
[A] Fifty-nine contracted physicians and 376 noncontracted physicians
were paid for services by more than one area office. For example, some
physicians practiced in a geographic area that serves federal CHS
programs in multiple IHS areas. The California and Alaska areas are not
included in this figure because they include only tribally operated CHS
programs.
[B] Seventy of the contracted physicians were also paid at billed
charges for some services. For example, a physician may have negotiated
with IHS to provide a specific service at a contracted rate, but all
other services provided by the physician were paid at billed charges.
These 70 physicians are included in the totals for both the contracted
and noncontracted physicians.
[End of figure]
For those physicians whom IHS's federal CHS programs paid under
contracts for reduced rates, the programs achieved significant savings
relative to the physicians' billed charges. Specifically, the federal
CHS programs paid about $12.1 million for these services, which
represented an estimated $16.7 million (58 percent) in savings,
relative to the physicians' billed charges.[Footnote 55] The
percentage of savings was fairly consistent across the IHS area
offices. The savings attributed to physician contracts ranged from
50.4 percent in the Aberdeen and Albuquerque Areas to 69.1 percent in
the Phoenix Area. (See table 1.) IHS's federal CHS programs' savings
from contracts with other nonhospital providers showed similar trends,
achieving estimated savings of 68 percent, or $25.3 million, relative
to billed charges.[Footnote 56]
Table 1: Savings for IHS's Federal CHS Programs Due to Physician
Contracts for Services Provided in 2010, by Area Office:
Area office[A]: Aberdeen;
For physicians paid under contract:
Billed charges: $5,632,186;
Amount paid: $2,793,323;
Contract savings[B]: $2,838,863;
Contract savings as a percentage of billed charges: 50.4%.
Area office[A]: Albuquerque;
For physicians paid under contract:
Billed charges: $2,437,173;
Amount paid: $1,208,701;
Contract savings[B]: $1,228,472;
Contract savings as a percentage of billed charges: 50.4%.
Area office[A]: Bemidji;
For physicians paid under contract:
Billed charges: $229,611;
Amount paid: $90,449;
Contract savings[B]: $139,162;
Contract savings as a percentage of billed charges: 60.6%.
Area office[A]: Billings;
For physicians paid under contract:
Billed charges: $5,786,494;
Amount paid: $2,541,273;
Contract savings[B]: $3,245,221;
Contract savings as a percentage of billed charges: 56.1%.
Area office[A]: Nashville;
For physicians paid under contract:
Billed charges: $121,592;
Amount paid: $48,460;
Contract savings[B]: $73,132;
Contract savings as a percentage of billed charges: 60.1%.
Area office[A]: Navajo;
For physicians paid under contract:
Billed charges: $2,441,217;
Amount paid: $1,002,058;
Contract savings[B]: $1,439,159;
Contract savings as a percentage of billed charges: 59.0%.
Area office[A]: Oklahoma City;
For physicians paid under contract:
Billed charges: $7,894,724;
Amount paid: $2,878,731;
Contract savings[B]: $5,015,993;
Contract savings as a percentage of billed charges: 63.5%.
Area office[A]: Phoenix;
For physicians paid under contract:
Billed charges: $1,887,211;
Amount paid: $582,920;
Contract savings[B]: $1,304,291;
Contract savings as a percentage of billed charges: 69.1%.
Area office[A]: Portland;
For physicians paid under contract:
Billed charges: $487,192;
Amount paid: $199,078;
Contract savings[B]: $288,114;
Contract savings as a percentage of billed charges: 59.1%.
Area office[A]: Tucson;
For physicians paid under contract:
Billed charges: $1,824,129;
Amount paid: $732,603;
Contract savings[B]: $1,091,526;
Contract savings as a percentage of billed charges: 59.8%.
Area office[A]: Total;
For physicians paid under contract:
Billed charges: $28,741,530;
Amount paid: $12,077,596;
Contract savings[B]: $16,663,934;
Contract savings as a percentage of billed charges: 58.0%.
Source: GAO analysis of IHS data.
Notes: Dollar values may not add to the total because of rounding.
[A] The California and Alaska areas are not included in this table
because they include only tribally operated CHS programs.
[B] Officials from IHS's fiscal intermediary said that, to help them
determine IHS's savings due to contracts, they encourage contracted
physicians to bill federal CHS programs at their full billed charges
and then the federal CHS programs pay the providers according to their
contracted rates. However, some contracted physicians instead bill
federal CHS programs according to their contracted rates. In the 2010
claims data, 204 out of 516 contracted physicians billed the federal
CHS programs at the same rate they were paid under their contract and
received payments from IHS totaling $512,915. Therefore, our estimate
of $16.7 million in physician contract savings, which is the
difference between the physicians' billed charges and the payments
received, may underestimate IHS's total savings due to contracts with
physicians.
[End of table]
IHS's Federal CHS Programs Paid Physicians More than What Medicare and
Private Health Insurers Would Have Paid for the Same Services:
IHS's federal CHS program payments to physicians for services provided
in 2010 were higher than what we estimate Medicare and private
insurers would have paid for these same services. These higher
payments resulted from payments federal CHS programs made to
noncontracted physicians at billed charges, as the CHS program
generally paid contracted physicians at rates similar to Medicare.
IHS's federal CHS programs paid, in total, two times what we estimate
Medicare would have paid for the same physician services provided in
2010. Specifically, of the $62.5 million in total payments for
services provided in 2010, the federal CHS programs could have saved
an estimated $31.7 million if they paid physicians what Medicare would
have paid for the same services. The federal CHS programs could have
used these savings to pay for more than double the number of physician
services they provided in 2010--approximately 253,000 additional
physician services (based on an average Medicare rate of $125 per IHS
physician service). Further, savings for the overall CHS program may
be even higher, as this analysis does not include payments for other
types of nonhospital services paid by the federal CHS programs, as
well as payments by tribally operated CHS programs, which receive over
half of annual CHS program funding and have also been found to pay for
nonhospital services above the Medicare rates.[Footnote 57] For
example, a 2009 OIG report found that there was no difference between
federally and tribally operated CHS programs in terms of the
percentages of nonhospital claims paid above Medicare rates.[Footnote
58] It estimated that federally and tribally operated CHS programs
could have saved almost half of total spending on nonhospital services
if nonhospital payments were capped at Medicare rates. This suggests
that both federally and tribally operated CHS programs are likely to
achieve significant savings if they paid physicians and other
nonhospital providers according to what Medicare would have paid for
the same services. The potential for savings is particularly
significant in light of the CHS program's inability to pay for all
needed services.
IHS's federal CHS programs paid physicians at rates that were higher
than Medicare rates because they primarily paid physicians at their
billed charges. Services provided by noncontracted physicians
accounted for approximately $30.5 million of the $31.7 million in
estimated total savings (96 percent) for the federal CHS programs.
Specifically, the federal CHS programs paid noncontracted physicians a
total of about $50.5 million at billed charges, which was two and a
half times what we estimate Medicare would have paid for the same
services (about $20 million). (See figure 6.)
Most, but not all, payments to contracted physicians were similar to
what Medicare would have paid.[Footnote 59] Federal CHS programs paid
contracted physicians about $12.1 million for services provided in
2010 and these payments to contracted physicians accounted for
approximately $1.2 million of the $31.7 million in estimated total
savings (about 4 percent). The federal CHS programs' contracts with
physicians were sometimes for negotiated rates that exceeded what
Medicare would have paid. Specifically, slightly over one-third of
total payments to contracted physicians were higher than what we
estimate Medicare would have paid. However, most payments to
contracted physicians were equal to or lower than what we estimate
Medicare would have paid.
Figure 6: Comparison of Payments from IHS's Federal CHS Programs with
Medicare Rates for Physician Services Provided in 2010:
[Refer to PDF for image: stacked vertical bar graph]
CHS program payments:
Payments at billed charges: $50.4 million;
Payments under contract: $12.1 million;
Total: $62.5 million.
CHS program payments if based on Medicare rates:
Payments at billed charges: $19.9 million;
Payments under contract: $10.9 million;
Total: $30.8 million.
Difference: $31.7 million.
Source: GAO analysis of IHS and CMS data.
Notes: We analyzed IHS claims data and data from the Medicare Physician
Fee Schedule. In the figure, the sum of the CHS program payments made
under contract and at billed charges does not total $62.5 million
because of rounding.
[End of figure]
IHS's federal CHS programs also paid more than what we estimate
private insurers would have paid for the same physician services
provided in 2010. Specifically, federal CHS programs paid about one
and a quarter times what we estimate private insurers would have paid
for the same services provided in 2010. Of those physician services
for which comparable services were available at the county level in
the private insurance data, the federal CHS programs paid about $51.5
million and private insurers would have paid an estimated $41.5
million, a difference of $10.0 million.[Footnote 60] (See figure 7)
Similar to what we found in the Medicare comparison, most of this
difference was attributable to those services for which the federal
CHS programs paid noncontracted physicians at billed charges--rates
that are higher than the rates paid by private insurers. Overall,
these payments to noncontracted physicians totaled $41.2 million,
which was more than one and a half times as much as the estimated
$27.3 million that private insurers would have paid for these same
services. However, in contrast to what we found in our Medicare
comparison, when federal CHS programs were able to negotiate reduced
rates with physicians, these rates were lower than what private
insurers would have paid. Specifically, CHS program payments to
contracted physicians totaled $10.3 million, while private insurers
would have paid an estimated $14.2 million for these same services.
This is because most of the federal CHS programs' payments to
contracted physicians were paid at or below Medicare rates, which are
typically lower than rates paid by private insurers.
Figure 7: Comparison of Payments from IHS's Federal CHS Programs with
Private Insurance Rates for Physician Services Provided in 2010:
[Refer to PDF for image: stacked vertical bar graph]
CHS program payments:
Payments at billed charges: $41.2 million;
Payments under contract: $10.3 million;
Total: $51.5 million.
CHS program payments if based on private insurer rates:
Payments at billed charges: $27.3 million;
Payments under contract: $14.2 million;
Total: $41.5 million.
Difference: $10.0 million.
Source: GAO analysis of IHS and CMS data.
Note: To account for any variation in payments due to geographic
location, we compared only those physician services from the federal
CHS program claims data that were provided in the same county as those
in the private insurance claims data. Therefore, of the 246,273 total
physician services in the CHS program data, we identified 231,099
(about 94 percent) services that were provided by private insurers in
the same counties. We were unable to compare physician services for
$11.0 million in payments from the federal CHS programs' claims to the
private insurance claims because these services were not provided in
the same county.
[End of figure]
Most Physicians We Interviewed Said CHS Program Payments Were a Small
Part of Their Total Payments and Cited Both Advantages and Concerns
about Capping Payments at Medicare Rates:
Most of the 10 physicians whom we interviewed indicated that the CHS
program represented a small portion of their practice and was not a
significant source of revenue. The physicians identified advantages of
capping CHS program payments for nonhospital services, including
physician services, at Medicare rates, but also expressed concerns
about the effect of such a cap on their finances.
Physicians We Interviewed Said CHS Program Payments Were Generally
Less than 10 Percent of Their Total Practice Payments and Were Often
at Medicare Rates:
According to most of the 10 physicians whom we interviewed, the CHS
program represented a small portion of their practice. All of the
physicians we interviewed were among federal CHS programs' top 25
percent of physicians in terms of their volume of paid services in
2010. However, 8 of the 10 physicians said total CHS program payments
constituted 10 percent or less of the total payments they received
from all payers.[Footnote 61] The remaining 2 physicians said the CHS
program accounted for a larger portion of their total payments. For
example, payments from the CHS program constituted 39 percent of total
payments for 1 physician who was located on a reservation. Payments
from the CHS program to the other physician, who was located near
three reservations, constituted 15 to 20 percent of total payments.
The 10 physicians we interviewed were divided between those who were
paid above Medicare rates by the CHS program and those who were paid
at or below Medicare rates. According to IHS 2010 claims data, federal
CHS programs paid the 10 physicians we interviewed a total of about
$990,000. Four of the 10 physicians had a contract with the CHS
program and were paid at or below Medicare rates.[Footnote 62] These
physicians' contracts with IHS saved the program about 60 percent
relative to the physicians' billed charges, which is comparable to the
federal CHS programs' percentage of estimated savings across all
physician contracts in that year. The other 6 physicians were paid by
the CHS program at billed charges that were higher than Medicare
rates. For example, 1 physician said he was paid at 133 percent of
Medicare rates and another said he was paid at 250 percent of Medicare
rates.
In terms of other payers, most physicians we interviewed said they
received the majority of their payments from Medicare and Medicaid.
Eight of the 10 physicians said their payments from Medicare and
Medicaid were close to 50 percent or more of their total payments,
[Footnote 63] with private insurance and self-pay patients
constituting most of their remaining payments. Two of these 8 said
that, respectively, they received 50 percent and 75 percent of their
total payments from Medicare alone. The remaining 2 of the 10
physicians said they received the majority of their total payments
from private insurance or self-pay patients. All 10 physicians
reported that they are accepting new patients from all payers,
including Medicare and the CHS program.[Footnote 64]
Physicians We Interviewed Identified Both Advantages and Concerns with
Capping CHS Program Payments at Medicare Rates:
The 10 physicians we interviewed identified advantages of capping CHS
program payments for nonhospital services, including physician
services, at Medicare rates, but also expressed concerns about the
effect of such a cap on their finances. The 4 physicians who were
already getting paid at or below Medicare rates, as well as 4 of the
other physicians who were getting paid at higher billed charges, said
such a cap would have little or no effect on their practices. Two of
these physicians noted that there would be little effect because the
CHS program is a small percentage of their practice. The remaining 2
of these 10 physicians, who were paid at higher billed charges, cited
concerns that a cap could affect their finances or patient access to
care.
Six of the physicians we interviewed, three of whom were paid at or
below Medicare rates, said they would support a cap on CHS program
payments for nonhospital services, including physician services, at
Medicare rates and provided various rationales for their support. For
example, one physician said that capping CHS program payments for
nonhospital services at the Medicare rates is a "good idea" that would
save IHS money. This physician expected that capping the CHS program
payments would allow him to substantially decrease the time his
practice spends negotiating with different CHS programs, especially
the numerous tribal CHS programs in his area. Others noted that
Medicare rates are nearly universally accepted by physicians and,
therefore, physicians are familiar with the Medicare Physician Fee
Schedule. One of these physicians added that paying physicians
according to Medicare rates would allow all physicians to receive
payment under a consistent methodology. Another physician said he
negotiated a contract with the CHS program for lower, Medicare rates
because, in his opinion, IHS should not be paying physicians at billed
charges that are higher than the rates paid by Medicare. A physician
paid by the CHS program at billed charges higher than Medicare agreed
that Medicare rates were appropriate. He said that he is already
receiving Medicare rates for many patients because the majority of his
work is done in a hospital and many patients needing his services are
older. Further, one physician noted that such a cap could increase his
practice's CHS program payment, as he currently receives Medicare
Physician Fee Schedule rates from the CHS program, but a cap on
payments for nonhospital services could allow him to be paid at the
higher cost-based reimbursement that he receives from Medicare.
[Footnote 65]
Four of the physicians we interviewed, three of whom said they were
paid by the CHS program at billed charges higher than Medicare, did
not support such a cap and expressed varying concerns about its effect
on their finances and patient access to care. Specifically, two
physicians noted that if their CHS program payments were capped at
Medicare rates and Medicare rates were reduced in the future, this
could have a significant adverse financial effect on their
practices.[Footnote 66] One physician said that reducing his rates to
Medicare levels would not allow him to cover his practice's costs, as
his billed charges are 133 percent of Medicare rates and CHS program
payments represented 39 percent of his practice. Two physicians also
indicated that certain specialists might be particularly affected by a
cap at Medicare rates. For example, one physician noted that there
have been significant reductions in Medicare rates for certain
cardiology services in recent years. The other physician said that an
orthopedic practice in his area that had previously contracted with a
CHS program decided to stop accepting tribal patients at Medicare
rates. Two physicians also noted they use the higher payments from the
CHS program and private payers to compensate for their payments from
Medicare and Medicaid, which they indicated do not cover their costs
for providing care.
Three physicians who did not support a cap on CHS program payments for
nonhospital services, including physician services, at Medicare rates
said they would support a rate cap set at a higher payment rate than
Medicare but lower than billed charges. Two of the physicians
suggested a cap set at a percent of their billed charges, while the
third suggested a cap set at 125 to 133 percent of the Medicare rates.
When we asked physicians if they had any concerns unrelated to CHS
program payment rates but that have had a financial effect on their
practice, all 10 cited challenges processing their CHS program payment
requests or receiving timely claims payment. The physicians said, for
example, that to receive payment from the CHS program they spent a
disproportionate amount of time, relative to other payers, gathering
paperwork in support of payment requests or monitoring the progress of
those requests. Specifically, 1 physician indicated that she received
the same rates as Medicare for the CHS program, but her claims
processing costs for the CHS program were significantly higher than
for Medicare. Physicians' concerns about claims administration echoed
those that we heard from physicians as part of a 2011 report examining
the CHS program.[Footnote 67]
Most Hospitals We Interviewed Indicated Little Negative Effect from
the Current MLR Requirement, as They Already Had CHS Program Contracts
to Be Paid at Medicare Rates:
Officials from most of the nine hospitals that we interviewed
indicated that the MLR requirement has had little or no financial
effect on their hospital.[Footnote 68] They said the CHS program
accounted for a small percentage of their total payments.[Footnote 69]
Officials from eight of the nine hospitals said the program accounted
for between 0.02 and 10 percent of their total payments;[Footnote 70]
officials from the other hospital said the CHS program accounted for
about 14 percent of its total payments.
Officials from seven of the nine hospitals noted that the CHS program
already paid them at Medicare rates prior to implementation of the MLR
requirement.[Footnote 71] Of these seven, officials from five
hospitals said the implementation of the MLR requirement has had
little or no financial effect on their hospital. Officials from the
other two of the seven hospitals did not experience a change in rates
from the implementation of MLR, but they had concerns with Medicare
payment rates in general, saying they do not cover their hospital's
costs of providing patient services. For each of the two hospitals,
officials said that the Medicare program accounted for a larger
portion of their payments than the CHS program--29 percent and 28
percent, while the CHS program accounted for 0.02 percent.
Officials from two hospitals indicated that the MLR requirement
reduced their payment rate. Officials from one of these hospitals said
that, prior to the implementation of the MLR requirement, the hospital
had a contract to be paid by the CHS program at 90 percent of its
billed charges; an official from the other hospital said the CHS
program had paid it at 100 percent of its billed charges. The official
described these previous rates as "ridiculous" because no other payer
they interacted with paid such high rates. Officials from both
hospitals indicated that they are now paid at MLRs. Officials from
both of these hospitals noted that they see most CHS program patients
through the emergency room and their hospital has an obligation under
the Emergency Medical Treatment and Active Labor Act (EMTALA) to treat
them regardless of their ability to pay.[Footnote 72] Officials from
one of the hospitals that did not experience a decrease in rates also
noted its EMTALA obligation in the context of access to care.
Although officials from most hospitals we interviewed said the CHS
program's MLR payment rates generally matched the rates they received
from Medicare, two hospitals designated as critical access hospitals
(CAH) said there were differences.[Footnote 73] IHS officials
explained that the CHS program, like Medicare, pays CAHs using service-
delivery costs that hospitals report to CMS in completed cost reports.
However, unlike IHS, CMS also considers interim cost reports submitted
by hospitals in calculating its Medicare payments to hospitals. IHS
officials said the completed cost reports may be 18 months out of date
relative to the interim cost reports.[Footnote 74] Officials from
these two CAHs indicated that because their most recent completed cost
report may be several months out of date, they were generally paid
less by the CHS program than by Medicare. One CAH official said the
difference was usually a few percentage points; the other said the
difference has averaged 8 percent. However, a CAH official said there
was one year (2011) when the CHS program overpaid the hospital because
it was using an outdated cost report. According to IHS officials, the
CHS program must rely on the completed cost reports because the CHS
program, unlike Medicare, does not have the funding flexibility to
settle with hospitals if the interim report is later determined to
need adjustment.[Footnote 75]
While the implementation of the MLR requirement had little financial
effect on most of the hospitals that we interviewed, officials from
all nine hospitals cited other factors that affected the payments they
received from the CHS program. For example, officials from seven
hospitals said they experienced problems having claims paid in a
timely way by the CHS program or that they spent more staff time
processing CHS program claims than they did for other payers.[Footnote
76] Officials from two of these hospitals added that they were
negatively affected when IHS made the decision to close the emergency
room in local IHS facilities because this resulted in an increased
patient load that placed greater pressure on their emergency rooms.
[Footnote 77]
IHS and Tribal Officials Said the MLR Requirement Allowed Them to
Expand Access and Said That a Similar Cap for Nonhospital Services
Could Have Similar Benefits:
IHS and tribal officials we interviewed said that setting payments for
hospital services at MLRs (as required by statute) allowed the CHS
program to reduce payments and expand access to care. They also agreed
that a cap on payments to nonhospital providers, including physicians,
could have similar benefits, although some officials noted that these
benefits may not be achieved by all CHS programs.
IHS and Tribal Officials We Interviewed Said the MLR Requirement
Allowed Them to Reduce Payments to Hospitals and Expand Access to Care:
IHS and tribal officials we interviewed said that the implementation
of the MLR requirement in 2007 allowed the CHS program to reduce
payments for hospital services. Although IHS officials told us that
prior to the implementation of the MLR requirement, area offices had
negotiated to pay many hospitals at Medicare rates, officials we
interviewed from four of the six area offices noted that some
hospitals were unwilling to negotiate reduced rates and therefore were
paid at billed charges. The MLR requirement required these hospitals
to accept Medicare rates. IHS officials noted that tribally operated
CHS programs likely experienced more savings from the MLR requirement
than federally operated CHS programs because tribally operated CHS
programs were generally less successful at negotiating contracts with
hospitals for reduced rates. Officials from three tribes, for example,
told us that they had difficulty negotiating for reduced rates with
hospitals and the MLR requirement enabled them to pay lower rates than
they had been able to negotiate. Overall, the tribal officials we
interviewed agreed that the MLR requirement benefited tribal programs
by allowing them to achieve savings. IHS officials also indicated that
the MLR requirement allowed them to devote less staff time to
negotiating contracts for hospital services at lower rates.[Footnote
78] One tribal official also noted that her tribe had already
successfully contracted with hospitals for Medicare rates, but said
that the MLR requirement allowed the tribe to save the time and staff
resources it had spent negotiating contracts.
IHS and tribal officials indicated that reduced payments from the MLR
requirement allowed the CHS program to expand access to care. For
example, officials from two area offices said that the lower rates
from the implementation of the MLR requirement have allowed some
federal CHS programs that could previously only fund high-priority
(priority level I) cases to now fund both priority level I and
priority level II cases--cases that would have previously been
deferred or denied.[Footnote 79] IHS officials indicated that the
lower payment rates paid to providers under the MLR requirement have
also allowed IHS to sustain the Catastrophic Health Emergency Fund
(CHEF) longer than it could prior to the implementation of MLR because
the higher payment rates would deplete the fund earlier in the fiscal
year.[Footnote 80] They said that IHS is now able to reimburse CHS
programs for more high-cost medical cases under CHEF than it could
prior to the implementation of the MLR requirement. In addition, IHS
officials said that, prior to the implementation of the MLR
requirement, hospitals were not required to accept IHS patients and
would sometimes turn them away in nonemergency situations. As part of
the MLR requirement, Medicare-participating hospitals are required to
accept IHS patients at the MLR rates, which IHS officials said has
expanded access to care for IHS patients.
IHS and tribal officials we interviewed did not identify any ongoing
challenges with patient access to care related to implementation of
the MLR requirement. Officials from three area offices said that they
were not aware of any challenges resulting from the implementation of
the MLR requirement, although officials from the other three area
offices and some tribal officials said that there were some initial
challenges. They said that some hospitals initially refused to accept
the new rates, so CHS program staff may have had to spend time
educating them about the new requirement. They noted that the
hospitals eventually accepted the required rates and it did not
negatively affect patient access to care.
IHS and Tribal Officials Described Challenges Contracting with
Nonhospital Providers for Reduced Rates and Said That a Cap at
Medicare Rates Could Be Beneficial, despite Certain Concerns:
IHS and tribal officials said CHS programs experienced challenges
contracting for negotiated rates with nonhospital providers. Five of
the six IHS area offices that we interviewed acknowledged that they
were unlikely to be able to negotiate with many additional providers.
[Footnote 81] Officials from all six area offices described their
efforts to contract with any known nonhospital providers, which
included sending contract documentation to frequently used providers
or new providers in their areas. However, officials from three area
offices noted that many providers do not respond. Officials from two
area offices said that there can be challenges negotiating contracts
in rural areas served by a single physician who may have little
incentive to negotiate a reduced rate. Area office officials also
noted that certain physician subspecialties, such as those providing
services for cancer or kidney disease, tend to be more resistant to
negotiating contracts. The officials said that this could be because
these physicians see fewer CHS program patients or because the
physicians believe that the lower rate would not cover their cost of
doing business. These challenges are not new for the CHS program. For
example, in 1991, IHS stated that it had not been possible for the
program to contract with each of the 4,600 professionals that it used
on a regular basis.[Footnote 82] The agency noted that it had
experienced difficulty negotiating contracts because many providers
were unwilling to contract and the area offices lacked the resources
necessary to negotiate contracts. Tribal officials described similar
challenges related to contracting. In addition, some tribal officials
noted that nonhospital providers are particularly hesitant to
negotiate contracts because of a history of problems getting paid in a
timely way by the CHS program.
Officials from all six of the area offices said that a cap on
nonhospital services, including physician services, at Medicare rates
would reduce payments to providers and they believed that the overall
effect for the CHS program would be positive. Officials from all six
area offices specifically cited the resulting financial savings from
the cap and indicated that this would allow the CHS programs to pay
for more care. Officials from four area offices noted that a cap would
be particularly beneficial in lowering the cost of certain high-cost
nonhospital services, such as cancer treatments, dialysis, and air
ambulance services. Officials from some of these areas said that
providers of these services have been less likely to negotiate
contracts. IHS headquarters also identified these same services as
high-volume and high-cost services that could benefit from a rate cap.
Officials from two area offices added that a cap based on an
established fee schedule would help standardize the rates that CHS
programs pay physicians, which would make it easier for programs to
estimate their spending.[Footnote 83] Officials from one area office
indicated that it was time consuming to identify physicians and
attempt to negotiate contracts for lower rates, and a cap would
eliminate the need for these efforts.[Footnote 84] However, IHS
headquarters officials told us that they would not be able to
implement a cap for nonhospital services, including physician
services, unless the agency received explicit statutory authority to
do so, because the current law requiring MLRs is limited to hospital
services.
Although officials from all of the area offices we interviewed
indicated that the overall effect of an MLR cap on nonhospital
services, including physician services, would be positive, four of the
area offices also identified potential concerns.[Footnote 85] For
example, four area offices noted that some rural areas have a limited
supply of providers and these providers may not consider Medicare
payment rates to be adequate, which could contribute to reduced
patient access to care if those providers stopped seeing patients at
Medicare rates. Officials from one of these area offices also noted
that a nonhospital payment cap based on Medicare rates could create
added expense and complexity for the CHS program because IHS's fiscal
intermediary, BCBSNM, would need to calculate Medicare payment rates
using the different payment methodologies used by CMS. BCSBNM
officials also noted that a cap on nonhospital providers would require
them to implement changes to their payment system to track and collect
additional claims data.[Footnote 86] Officials from one area office
noted that the added complexity could be especially challenging for
tribal CHS programs that do not contract with a fiscal intermediary to
process their claims. Similarly, officials from one tribal area
indicated that it was difficult for some tribes to learn how to
calculate hospital rates when the MLR requirement was implemented, and
they expected that calculating rates for nonhospital services would be
more challenging.
The tribal officials that we interviewed agreed that a cap on payments
for nonhospital services, including physician services, could reduce
CHS program payments to providers and achieve savings, although some
officials noted that these benefits may not be achieved by all CHS
programs. Some tribal officials indicated that a cap on nonhospital
services at Medicare rates could save them money. For example,
officials from one tribe said that, because individual providers had
been unwilling to contract with them, they contract with a private
insurer to utilize the rates that insurer has negotiated with
providers. However, the tribal officials noted that the insurer's
negotiated rates are still higher than Medicare rates, so capping CHS
program payments for nonhospital services at Medicare rates would
allow the tribe to further lower its rates without having to contract
with the private insurer. They indicated that these savings would
allow them to expand patient access to care. However, officials from
some tribes worried that a cap could result in access-to-care problems
if physicians decided to stop seeing CHS program patients because of
the lower payment rates. For example, tribal officials from one area
noted that, while a cap could be beneficial for the general CHS
program, it could lead to problems for certain tribes. They said that
some physicians serving a large, rural tribe in their area had already
chosen not to participate in Medicare because of the low payment
rates. IHS headquarters officials noted that they had heard similar
concerns during their discussions with tribal officials, although the
tribal officials had generally been supportive of a cap to reduce CHS
program payments for nonhospital services, including physician services.
IHS officials indicated that it would be important to monitor patient
access to care if CHS program payment rates for nonhospital services
were changed. The officials said that IHS currently tracks the number
of individuals who are unable to have care funded by the CHS program
because, for example, of a lack of funding. However, it does not have
a mechanism, such as a survey, to obtain information about patient
access to care and physicians' willingness to accept CHS program
payments. They said that IHS would likely be able to monitor these
issues if mechanisms were put in place prior to any changes in payment
rates.
Conclusions:
IHS's CHS program serves as an important resource for American Indian
and Alaska Native patients who need health care services that are not
available in federal and tribal facilities. However, most federally
and tribally operated CHS programs are unable to pay for all needed
services, which underscores the need for them to maximize the care
they can purchase within available funding. The 2007 implementation of
the MLR requirement for hospitals allowed IHS and tribes to reduce the
cost of hospital services and use those savings to pay for more care.
Nonhospital services, including physician services, were not included
in the scope of the MLR requirement, and the CHS program continues to
rely on the ability of area offices to negotiate contracts with
individual providers for reduced rates that are lower than billed
charges. Since 1986, IHS policy has stated that area offices should
attempt to negotiate with providers at rates that are no higher than
Medicare rates, and IHS officials we interviewed described time-
consuming efforts to establish such contracts. However, in 2010, IHS
still primarily paid nonhospital providers, including physicians, at
their billed charges. Our findings, which indicate that IHS could have
saved an estimated $32 million out of the $62.5 million that federally
operated CHS programs spent on physician services provided in 2010,
are consistent with a 2009 OIG report and a 2009 internal IHS study.
If trends in payments for other types of nonhospital services and the
tribal CHS programs are similar to the payments for the federal CHS
program physician services that we examined, we estimate that savings
from capping all nonhospital services paid by federal and tribal CHS
programs at Medicare rates could be significantly higher. These
savings could be used to pay for some of the many services that the
CHS program is unable to fund each year.
As a steward of public resources, IHS is responsible and accountable
for using taxpayer funds efficiently and effectively. Despite the
OIG's 2009 recommendation that IHS seek legislative authority to cap
CHS program payments for nonhospital providers, including physicians,
the agency has not pursued that authority. As a consequence, while
other major federal health care payers have based their payment
methodologies on Medicare, IHS still pays significantly higher billed
charges for many services. Setting CHS program physician and other
nonhospital payments at rates consistent with Medicare and the rates
of these other federal agencies would enable IHS to achieve needed
savings that could be used to expand patient access to health care.
Moreover, given the possibility that a change in payment rates could
affect access to care in certain areas, it is important that IHS put
mechanisms in place to monitor patient access to care to assess how
new payment rates may benefit or impede the availability of care.
Matter for Congressional Consideration:
Congress should consider imposing a cap on payments for physician and
other nonhospital services made through IHS's CHS program that is
consistent with the rates paid by other federal agencies.
Recommendation for Executive Action:
Should the Congress decide to cap payments for physician and other
nonhospital services made through IHS's CHS program, we recommend that
the Secretary of Health and Human Services direct the Director of IHS
to monitor CHS program patient access to physician and other
nonhospital care in order to assess how any new payment rates may
benefit or impede the availability of care.
Agency Comments and Our Evaluation:
We provided a draft of this report to HHS for review and received
written comments, which are reprinted in appendix I. HHS agreed with
our conclusions and our recommendation. Specifically, HHS indicated
that implementing a cap on CHS program payments to physicians and
other nonhospital services at Medicare rates would enable the CHS
program to fund additional services. HHS also indicated that
monitoring patient access to care in light of any payment changes is
essential to providing high-quality health care to American Indians
and Alaska Natives.
We are sending copies of this report to the Secretary of Health and
Human Services and other interested parties. In addition, the report
is available at no charge on the GAO website at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions
to this report are listed in appendix II.
Signed by:
Kathleen M. King:
Director, Health Care:
List of Addressees:
The Honorable Maria Cantwell:
Chairman:
The Honorable John Barrasso:
Ranking Member:
Committee on Indian Affairs:
United States Senate:
The Honorable Don Young:
Chairman:
The Honorable Colleen Hanabusa:
Ranking Member:
Subcommittee on Indian and Alaska Native Affairs:
Committee on Natural Resources:
House of Representatives:
Tim Johnson:
United States Senate:
Lisa Murkowski:
United States Senate:
John Thune:
United States Senate:
[End of section]
Appendix I: Comments from the Department of Health and Human Services:
Department Of Health & Human Services:
Office of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
March 30, 2013:
Kathleen King:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Dear Ms. King:
Attached are comments on the U.S. Government Accountability Office's
(GAO) report entitled, "Indian Health Service: Capping Payment Rates
for Nonhospital Services Could Save Millions for Contract Health
Services" (GAO-13-272).
The Department appreciates the opportunity to review this report prior
to publication.
Sincerely,
Signed by:
Jim R. Esquea:
Assistant Secretary for Legislation:
Attachment:
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Office's (GAO) Draft Report Entitled,
"Indian Health Service: Capping Payment Rates For Nonhospital Services
Could Save Millions For Contract Health Services" (GA0-13-272):
The Department appreciates the opportunity to comment on this draft
report.
HHS is committed to improving the Indian Health Service's (IHS)
Contract Health Services (CHS) program and has developed the following
response to the GAO recommendation for executive action.
Recommendation:
Should the Congress decide to cap payments for physician and other
nonhospital services made through IHS's CHS program, we recommend that
the Secretary of Health and Human Services direct the Director of IHS
to monitor CHS program patient access to physician and other
nonhospital care in order to assess how any new payment rates may
benefit or impede the availability of care.
HHS Response:
We concur with GAO's conclusions and recommendation. Implementing CHS
program payments for physician and nonhospital services that are
consistent with Medicare will enable the CHS program to fund
additional needed services, However, CHS programs at the federal and
tribal facilities will continue to be unable to pay for all eligible
services despite increases in CHS program appropriated funds and the
potential to provide additional services, as detailed in this report.
Monitoring patient access to care as a result of any changes to
payment rates is essential to providing quality health care to
American Indian and Alaska Native patients.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kathleen M. King, (202) 512-7114 or kingk@gao.gov:
Staff Acknowledgments:
In addition to the contact name above, Catina Bradley, Assistant
Director; Julianne Flowers; William Hadley; Sarah-Lynn McGrath; Lisa
Motley; Laurie Pachter; and Michael Rose made key contributions to
this report.
[End of section]
Footnotes:
[1] IHS defines an Indian tribe as any Indian tribe, band, nation,
group, Pueblo, or community, including any Alaska Native village or
Native group, which is federally recognized as eligible for the
programs and services provided by the United States to Indians because
of their status as Indians.
[2] The CHS program is funded through the annual appropriations
process and must operate within the limits of its appropriations.
Appropriations to IHS for the CHS program are apportioned by the
Office of Management and Budget, allotted to area office directors,
and further distributed through allowances to federal CHS programs or
payments to tribal CHS programs.
[3] GAO, Indian Health Service: Health Care Services Are Not Always
Available to Native Americans, [hyperlink,
http://www.gao.gov/products/GAO-05-789] (Washington, D.C.: Aug. 31,
2005).
[4] GAO, Indian Health Service: Increased Oversight Needed to Ensure
Accuracy of Data Used for Estimating Contract Health Service Need,
[hyperlink, http://www.gao.gov/products/GAO-11-767] (Washington, D.C.:
Sept. 23, 2011).
[5] Medicare is the federal government's health insurance program for
individuals aged 65 and older and for individuals with certain
disabilities or end-stage renal disease.
[6] 51 Fed. Reg. 23,540 (June 30, 1986). The policy stated that while
tribal programs were encouraged to adopt cost-containment measures,
the policy applied only to federal CHS programs.
[7] Department of Health and Human Services, Office of Inspector
General, Review of the Indian Health Service's Contract Health
Services Program (Washington, D.C.: Jan. 21, 1999).
[8] Pub. L. No. 108-173, § 506, 117 Stat. 2066, 2294-95 (2003).
[9] Other nonhospital providers, for which the MLR requirement does
not apply, include independent laboratories, ambulatory surgical
centers, and independent ambulance providers.
[10] Department of Health and Human Services, Office of Inspector
General, IHS Contract Health Services Program: Overpayments and
Potential Savings (Washington, D.C.: September 2009).
[11] This work was also identified in a March 2009 request from the
Senate Committee on Indian Affairs and individual members prior to the
enactment of the Patient Protection and Affordable Care Act, which
provided for the enactment of the Indian Health Care Improvement
Reauthorization and Extension Act of 2009. See Pub. L. No. 111-148, §
10221, 124 Stat. 119, 935 (2010) (enacting S. 1790, as reported by the
Committee on Indian Affairs in the Senate in December 2009, into law
with amendments); S. 1790, 111th Cong. § 199 (2009).
[12] The federal CHS programs account for approximately 46 percent of
total CHS program payments, and their claims are administered by a
single fiscal intermediary that contracts with IHS. We did not examine
claims data from the tribal CHS programs, which account for the
remaining 54 percent of total CHS program payments. Tribal CHS
programs operate their programs independently and do not use a single
fiscal intermediary.
[13] The Medicare Physician Fee Schedule contains fees for each of
over 7,000 physician services, such as office visits, surgical
procedures, and tests. Each service is identified by a single billing
code from the Healthcare Common Procedure Coding System, which is a
standardized coding system that physicians use to bill for procedures
provided in the delivery of health care. A single claim may contain
multiple services. Other nonhospital services, such as ambulatory
surgical center services, are priced by Medicare using different
methodologies.
[14] These physician services comprised about 55 percent of the
nonhospital services for which the CHS program was the primary payer.
[15] In addition, when pricing these services, we applied Medicare
payment modifiers that were also used by IHS's fiscal intermediary
when paying contracted physicians at Medicare rates. These modifiers
included modifiers for the technical and professional components, as
well as modifiers for assistant at surgery, bilateral surgery, and co-
surgeon. In addition, we applied Medicare's diagnostic imaging
adjustment, which requires that payment for certain imaging services
under the Medicare Physician Fee Schedule not exceed what Medicare
pays for these services performed in hospital outpatient departments.
We did not apply Medicare policies that aim to reduce inappropriate
payments, such as those developed by the National Correct Coding
Initiative, Medicare incentive payments, such as bonuses for services
provided in a Health Professional Shortage Area, or Medicare coverage
policies, such as national coverage determinations.
[16] IHS's claims processing system does not collect the information
necessary for us to determine whether a physician service should be
paid at facility (such as a hospital) or nonfacility (such as a
physician's office) Medicare rates. When paying contracted physicians
at Medicare rates, IHS categorizes all physician claims as
nonfacility, even if they were provided in a facility. Therefore, we
used a combination of other variables to approximate whether the
service was provided in a facility. This methodology may not have
identified all facility claims. Since Medicare generally pays less for
services provided in a facility, our estimate of what Medicare would
have paid for these same services may be higher than we would have
estimated if this information were available.
[17] For the purpose of these interviews, the term "physician" refers
to an entity, rather than an individual. The entities that we selected
using CHS program claims data could have been a single physician or a
physician group. After we initially contacted the selected entity, we
were directed to the most appropriate individual to interview about
payment issues. These identified individuals included the physician,
the physician's billing staff, or administrative staff.
[18] Residence in a CHSDA is generally a requirement for individuals
to have their services paid through the CHS program. (See figure 1 for
a map of counties designated by IHS as CHSDAs.)
[19] We identified counties as urban or rural according to the U.S.
Department of Agriculture's rural-urban continuum coding system.
Specifically, we defined urban counties as those with a population of
20,000 or more. We defined rural counties as those with a population
of less than 20,000.
[20] We planned to select 5 physicians from each list. Because of a
low response rate among rural physicians, we ultimately interviewed 4
rural physicians and 6 urban physicians.
[21] Although these physicians were selected on the basis of their
interactions with federally operated CHS programs, their comments
could pertain to either federal or tribal CHS programs, as some
physicians interacted with both types of programs and we did not ask
them to differentiate between program type during the interviews.
[22] We identified counties as urban or rural according to the U.S.
Department of Agriculture's rural-urban continuum coding system.
Specifically, we defined urban counties as those with a population of
20,000 or more. We defined rural counties as those with a population
of less than 20,000.
[23] Although these hospitals were selected on the basis of their
interactions with federally operated CHS programs, their comments
could pertain to either federal or tribal CHS programs, as some
hospitals interacted with both types of programs and we did not ask
them to differentiate between program type during the interviews.
[24] IHS's 12 area offices are Aberdeen, Alaska, Albuquerque, Bemidji,
Billings, California, Nashville, Navajo, Oklahoma City, Phoenix,
Portland, and Tucson.
[25] Under the Indian Self-Determination and Education Assistance Act,
as amended, federally recognized Indian tribes can enter into self-
determination contracts or self-governance compacts with the Secretary
of Health and Human Services to take over administration of IHS
programs for Indians because of their status as Indians previously
administered by IHS on their behalf. Self-governance compacts allow
tribes to consolidate and assume administration of all programs,
services, activities, and competitive grants administered throughout
IHS, or portions thereof, that are carried out for the benefit of
Indians because of their status as Indians. Self-determination
contracts allow tribes to assume administration of a program,
programs, or portions thereof. See 25 U.S.C. §§ 450f(a) (self-
determination contracts), 458aaa-4(b)(1) (self-governance compacts).
[26] IHS has established four broad medical priority levels of health
care services eligible for payment and a fifth for excluded services
that cannot be paid for with CHS program funds. Priority level I
services are the highest priority services and include
emergent/acutely urgent care services, such as trauma care,
acute/chronic renal replacement therapy, obstetrical delivery, and
neonatal care.
[27] See 25 U.S.C. §§ 1621e, 1623; 42 C.F.R. § 136.61. There are
certain exemptions to the CHS program's designation as a payer of last
resort. For example, certain tribally funded insurance plans are not
considered alternate resources and the CHS program must pay for care
before billing the tribally funded insurance plan. The CHS program
must also pay for care provided to eligible American Indians and
Alaska Natives before the crime victim compensation program, a federal
program that provides compensation to victims and survivors of
criminal violence.
[28] Other types of nonhospital services include those provided by
independent laboratories, free-standing ambulatory surgical centers,
and independent ambulance providers.
[29] 51 Fed. Reg. 23,540 (June 30, 1986).
[30] Indian Health Manual, ch. 5, Acquisition Management, pt. 5,
Management Services.
[31] 56 Fed. Reg. 10,566 (Mar. 13, 1991).
[32] Federal CHS programs paid the remaining $44.1 million (about 17
percent of total payments) for hospital and nonhospital services where
the CHS program was not the primary payer. CHS program patients may
qualify for other forms of insurance and, as the CHS program is the
payer of last resort, the program is sometimes not the primary payer.
However, the majority of payments from federal CHS programs to
providers are for services for which the CHS program is the primary
payer.
[33] We isolated physician services by excluding other nonhospital
services that were not covered by the 2010 Medicare Physician Fee
Schedule. We also excluded services provided by anesthesiologists.
[34] About one-quarter of Medicare beneficiaries are covered by
Medicare Advantage, rather than the traditional Medicare program.
Under Medicare Advantage, CMS provides private insurance plans with a
monthly amount per beneficiary that is adjusted to reflect beneficiary
health status.
[35] Medicare Payment Advisory Commission, Report to the Congress:
Medicare Payment Policy (Washington, D.C.: March 2012).
[36] In fiscal year 2010, DOD offered health care to over 9.5 million
eligible beneficiaries through TRICARE. Under TRICARE, eligible
beneficiaries may obtain care either from military hospitals and
clinics, referred to as military treatment facilities, or from
civilian providers.
[37] See 10 U.S.C. §§ 1079(h), (j), 1086(f), (g).
[38] See 38 C.F.R. § 17.56. VA spent approximately $45 billion in
fiscal year 2010 to provide health care to about 5 million veterans.
Of this, approximately $4 billion was paid to non-VA providers,
generally for services that were not available at VA facilities.
[39] Prior to this change, VA paid Medicare rates for hospital
services and physician services covered by rates listed on the
Medicare Physician Fee Schedule for participating physicians. The
agency now pays Medicare rates for nonhospital services covered by
other Medicare payment methodologies, such as Ambulatory Surgical
Center Payment and the Clinical Laboratory Fee Schedule. If VA has
negotiated a specific amount with a provider, VA will pay that amount
instead of Medicare rates.
[40] 75 Fed. Reg. 78,901 (Dec. 17, 2010) (amending 38 C.F.R. §§ 17.52,
17.56).
[41] See, for example, GAO, Medicare Physician Services: Utilization
Trends Indicate Sustained Beneficiary Access with High and Growing
Levels of Access in Some Areas of the Nation, [hyperlink,
http://www.gao.gov/products/GAO-09-559] (Washington, D.C.: Aug. 28,
2009); GAO, Medicare Physician Services: Use of Services Increasing
Nationwide and Relatively Few Beneficiaries Report Major Access
Problems, [hyperlink, http://www.gao.gov/products/GAO-06-704]
(Washington, D.C.: July 21, 2006); and Medicare Payment Advisory
Commission, Report to the Congress: Medicare and the Health Care
Delivery System (Washington, D.C.: June 2012).
[42] See, for example, [hyperlink,
http://www.gao.gov/products/GAO-06-704] and Medicare Payment Advisory
Commission, Report to the Congress: Medicare and in Rural America
(Washington, D.C.: June 2001).
[43] Medicare Payment Advisory Commission, Report to the Congress:
Medicare and in Rural America and Center for Studying Health System
Change, Physician Acceptance of New Medicare Patients Stabilized in
2004-05 (Washington, D.C.: January 2006).
[44] See, for example, GAO, Defense Health Care: TRICARE Multiyear
Surveys Indicate Problems with Access to Care for Nonenrolled
Beneficiaries, [hyperlink, http://www.gao.gov/products/GAO-13-364]
(Washington, D.C.: April 2, 2013); GAO, Defense Health Care: Access to
Civilian Providers under TRICARE Standard and Extra, [hyperlink,
http://www.gao.gov/products/GAO-11-500] (Washington, D.C.: June 2,
2011) and Defense Health Care: Across-the-Board Physician Rate
Increases Would be Costly and Unnecessary, [hyperlink,
http://www.gao.gov/products/GAO-01-620] (Washington, D.C.: May 24,
2001).
[45] Under the VA Alaska Fee Schedule the amount paid in Alaska for
each service is 90 percent of the average amount VA actually paid in
Alaska for the same services in fiscal year 2003, adjusted annually
for inflation. In 2003, VA had been paying providers in Alaska at
about 75 percent of their billed charges. DOD calculated that, on
average in 2006, VA reimbursement rates in Alaska were 35 percent
higher than DOD rates and 73 percent higher than Medicare rates.
Therefore, in 2007, DOD increased its payment rates in Alaska to bring
them in line with those paid by VA.
[46] [hyperlink, http://www.gao.gov/products/GAO-11-500] and
[hyperlink, http://www.gao.gov/products/GAO-01-620].
[47] In recognition of these challenges, a task force consisting of
members from several agencies--including DOD, VA, CMS, and IHS--has
examined how federal agencies with responsibility for health care
services in Alaska are meeting the needs of Alaskans. In September
2010, the task force issued its report recommending that, among other
things, federal agencies should support the development of a uniform
provider payment rate for similar services for Medicare, DOD, and VA.
See Report to Congress of the Interagency Access to Health Care in
Alaska Task Force (Sept. 17, 2010).
[48] [hyperlink, http://www.gao.gov/products/GAO-09-559] and GAO, End-
Stage Renal Disease: CHS Should Monitor Access to and Quality of
Dialysis Care Promptly after Implementation of New Bundled Payment
System, [hyperlink, http://www.gao.gov/products/GAO-10-295]
(Washington, D.C.: Mar. 31, 2010).
[49] See Pub. L. No. 108-136, § 723, 117 Stat. 1392, 1532-34 (2003),
and S. Rep. No. 108-46, at 330 (2003).
[50] See Pub. L. No. 110-181, § 711(a), 122 Stat. 3, 190-191 (2008).
DOD was directed to conduct these annual surveys from fiscal year 2008
through 2011. The agency has since been directed to continue these
annual surveys of beneficiaries and civilian providers through 2015.
See Pub. L. No. 112-81, § 721(a), 125 Stat. 1298, 1479 (2011).
[51] Some research indicates that uninsured patients rarely pay billed
charges, and amounts charged to them may be heavily discounted based
on charity care or other reduced payment programs. See GAO, Health
Care Price Transparency: Meaningful Price Information Is Difficult for
Consumers to Obtain Prior to Receiving Care, [hyperlink,
http://www.gao.gov/products/GAO-11-791] (Washington, D.C.: Sept. 23,
2011) and Mark Merlis, "Health Care Price Transparency and Price
Competition," National Health Policy Forum (Mar. 28, 2007).
[52] The total number of unique physicians is 3,531. However, 70
contracted physicians were also paid at billed charges for some
services and are included in the totals for both the contracted and
noncontracted physicians. For example, a physician may have negotiated
with IHS to provide a specific service at a contracted rate, but all
other services provided by the physician were paid at billed charges.
[53] Fifty-nine contracted physicians and 376 noncontracted physicians
were paid for services by more than one area office. For example, some
physicians practiced in a geographic area that serves federal CHS
programs in multiple IHS areas.
[54] The total number of unique other nonhospital providers was 3,590.
However, 62 contracted providers were also paid at billed charges for
some services and are included in the totals for both the contracted
and noncontracted providers. For example, a provider may have
negotiated with IHS to provide a specific service at a contracted
rate, but all other services provided by the provider were paid at
billed charges. In addition, 1,833 of the 3,590 providers of other
nonhospital services also provided physician services that were
covered by the Medicare Physician Fee Schedule. These providers are
therefore also included in the total number of physicians.
[55] Officials from IHS's fiscal intermediary said that, to help them
determine IHS's savings due to contracts, they encourage contracted
physicians to bill federal CHS programs at their full billed charges,
and then the federal CHS programs pay the providers according to their
contracted rates. However, some contracted physicians instead bill
federal CHS programs according to their contracted rates. In the 2010
claims data, 204 out of 516 contracted physicians billed the federal
CHS programs at the same rate they were paid under their contract and
received payments from IHS totaling $512,915.Therefore, our estimate
of $16.7 million in physician contract savings, which is the
difference between the physicians' billed charges and the payments
received, may underestimate IHS's total savings due to contracts with
physicians.
[56] Officials from IHS's fiscal intermediary said that, to help them
determine IHS's savings due to contracts, they encourage other
nonhospital providers with contracts to bill federal CHS programs at
their full billed charges and then the federal CHS programs pay the
nonhospital providers according to their contracted rates. However,
some nonhospital providers with contracts instead bill federal CHS
programs according to their contracted rates. In the 2010 claims data,
164 out of 507 contracted nonhospital providers billed the federal CHS
programs at the same rate they were paid under their contract and
received payments from IHS totaling $4,160,153. Therefore, our
estimate of $25.3 million in nonhospital provider contract savings,
which is the difference between the providers' billed charges and the
payments received, may underestimate IHS's total savings due to
contracts with other types of nonhospital providers.
[57] The proportion of payments for other types of nonhospital
services that were paid at billed charges was similar to physician
services. Although we did not compare payments for other types of
nonhospital services to Medicare rates, if we assume payment trends
for these services are similar to physician services, we estimate that
federal CHS programs could have saved an additional $26.4 million for
services provided in 2010. In addition, tribal CHS programs receive
about 54 percent of CHS program funds and IHS officials have indicated
that tribes have been less likely than federal CHS programs to
contract with providers for reduced rates. If we assume that
contracting and payment trends for tribal CHS programs are similar to
federal CHS programs, we estimate that tribal CHS programs could have
saved an additional $68.2 million for services provided in 2010 if
their physician and other nonhospital services were paid at Medicare
rates. Therefore, we estimate that federal and tribal CHS programs
could have saved a total of about $126.4 million if all physician and
other nonhospital services provided in 2010 were paid at Medicare rates.
[58] See Department of Health and Human Services, Office of Inspector
General, IHS Contract Health Services Program: Overpayments and
Potential Savings (September 2009).
[59] We considered IHS payment amounts that were within 10 percent of
the Medicare rates to be similar to the Medicare rates.
[60] To account for any variation in payments due to geographic
location, we compared only those physician services from the federal
CHS program claims data that were provided in the same county as those
in the private insurance claims data. Therefore, of the 246,273 total
physician services in the CHS program data, we identified 231,099
(about 94 percent) services that were provided by private insurers in
the same counties. We were unable to compare physician services for
$11.0 million in payments from the federal CHS programs' claims to the
private insurance claims because these services were not provided in
the same county.
[61] CHS program-eligible patients may have constituted a greater
proportion of physicians' patient mix than patients whose services
were paid for by the CHS program, as some CHS program patients have
other forms of insurance, including Medicare, Medicaid, and private
insurance, which would have served as the primary payer.
[62] Of the four physicians who contracted with IHS to be paid at or
below Medicare rates, some provided a small number of services that
were paid by the CHS program at billed charges.
[63] Medicaid physician fees vary by state, but are generally less
than the fees paid by Medicare in that state. See Stephen Zuckerman,
Aimee Williams, and Karen Stockley, "Trends in Medicaid Physician
Fees, 2003-2008," Health Affairs, vol. 28, no. 3 (2009).
[64] This is consistent with findings from MedPAC that most physicians
are accepting new patients, although fewer physicians are accepting
new Medicaid patients than Medicare and privately insured patients. In
addition, MedPAC reported that physicians in rural areas were more
likely than those in urban areas to accept new patients of all
insurance types and physicians who classified themselves in surgical
or medical specialties were more likely than primary care physicians
to accept new Medicare and privately insured patients. Medicare
Payment Advisory Commission, Report to the Congress: Medicare Payment
Policy.
[65] This physician said he provides care in rural health clinics,
which are paid by Medicare on the basis of their costs. The physician
said these cost-based payments are three times higher than the
Medicare Physician Fee Schedule payments he receives from the CHS
program.
[66] The Medicare Physician Fee Schedule is updated annually under the
sustainable growth rate system, with the intent of limiting the total
growth in Medicare spending for physician services over time. Because
of rapid growth in Medicare spending for physician services, the
sustainable growth rate has called for fee reductions since 2002.
However, the Congress has averted such fee reductions for 2003 through
2013. Under current law, Medicare's fees to physicians are scheduled
to be reduced by about 27 percent in 2014. See 42 U.S.C. § 1395w-4(d).
[67] [hyperlink, http://www.gao.gov/products/GAO-11-767].
[68] We interviewed officials from 10 hospitals, but we are only
discussing the views of 9. We excluded 1 hospital because the
officials had little knowledge of the CHS program, the rates that it
paid, or if it has contracted with IHS for negotiated rates. The
officials from this hospital indicated that it receives less than 3
percent of its payments from the CHS program.
[69] In 2010, federal CHS programs paid these nine hospitals $12.5
million, which was $50.5 million less than their billed charges.
Nationally, federal CHS programs paid $119.5 million for hospital
services subject to MLR and these payments were $444.0 million less
than the rate billed by hospitals.
[70] In comparison, four of the hospitals indicated that Medicare and
Medicaid constituted the majority of their payments (53 to 70
percent), while these payers constituted 29 to 46 percent of payments
for the other five hospitals. Private insurance accounted for between
19 and 61 percent of total payments for all nine hospitals.
[71] This trend is similar to the overall CHS program, as, according
to IHS officials, many hospitals were already being paid at or near
Medicare rates prior to implementation of the MLR requirement.
[72] EMTALA requires most hospitals to provide an examination and
needed stabilizing treatment, without consideration of insurance
coverage or ability to pay, when a patient presents to an emergency
room for attention to an emergency medical condition. See generally 42
U.S.C. § 1395dd.
[73] Medicare designates some small, rural hospitals as CAHs, which
allows them to be paid at higher rates under a different payment
methodology.
[74] Medicare pays CAHs for inpatient and outpatient services at 101
percent of reasonable costs. Hospitals report these costs through the
Medicare cost report. Because there is a delay between the start of a
fiscal year and when that year's cost report is audited and finalized,
hospitals submit interim reports to update their costs.
[75] IHS requires the use of a closed or completed cost report
available at the time services are provided as the basis for its
payment rates to CAHs. IHS officials indicated that the CHS program
does not use an interim cost report to set rates. The CHS program
depletes its annual funding and IHS officials, therefore, indicated
that the program is unable to retrospectively increase provider
payments in response to a completed cost report updated for the year
in which the services were provided. However, IHS does make
retrospective adjustments to recover overpayments. See 42 C.F.R. §§
136.30(c)(2), 136.32(b).
[76] We previously reported that a selection of hospital and office-
based providers described similar burdens resulting from their
interactions with the CHS program, including challenges in determining
patient eligibility for CHS payment of services, in obtaining CHS
payment, and in receiving communications on CHS policies and
procedures from IHS related to payment. See [hyperlink,
http://www.gao.gov/products/GAO-11-767].
[77] IHS has also acknowledged that reductions in the availability of
services at facilities operated by IHS increase the need for tribes to
use the CHS program to purchase care from external providers. In its
2012 budget justification, IHS noted that due to insufficient workload
or service populations, five hospitals operated through IHS funding
had been or are planned to be replaced by ambulatory health centers
with no inpatient services. As a result, tribes in these areas will be
required to purchase inpatient care from external providers through
the CHS program in order to maintain the same level of services.
[78] Officials from three area offices indicated that they continue to
enter into contracts with hospitals because these contracts have other
benefits, such as helping to build relationships and share patient
information, which improves patient care and payment processing.
[79] Priority level I services include emergent/acutely urgent care
services, such as trauma care, acute/chronic renal replacement
therapy, obstetrical delivery, and neonatal care. Priority level II
includes preventive care services, such as preventive ambulatory care,
routine prenatal care, and screening mammograms.
[80] CHEF is administered by IHS headquarters to reimburse federally
and tribally operated facilities for their CHS program expenses from
paying for the costs associated with treating catastrophic illness or
victims of natural disasters.
[81] Officials from the other area office indicated that their goal is
to contract with as many providers as is feasible, but did not address
whether they would be able to expand their current efforts.
[82] 56 Fed. Reg. 10,566 (Mar. 13, 1991).
[83] According to IHS officials, CHS programs are expected to actively
manage their funds in order to maximize the care that can be
purchased. They said that most CHS programs establish budgets as a way
to help ensure that funds are available throughout the year.
[84] Officials from the other five area offices cited nonfinancial
benefits of having contracts with providers, including increased
continuity of care arising from the ability to refer a patient to the
same facility as often as necessary; the opportunity to investigate,
pursuant to contractual provisions, whether adequate and appropriate
care and customer service was provided; and the ability to specify the
CHS program's requirements for payment.
[85] The other two area offices indicated that they did not expect a
cap on nonhospital services to create any problems with patient access
to care.
[86] BCBSNM officials noted, for example, that because they currently
pay few nonhospital claims at Medicare rates, they generally process
such claims manually. If all nonhospital claims were required to be
paid at Medicare rates, they would have to update their system to
capture the claims data necessary to automatically process these claims.
[End of section]
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